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SEBI Eyes Same-Day Settlement

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The most awaited news for the investors in the stock market is here. In a recent announcement at the Global Economic Policy Forum in Delhi's Bharat Mandapam, Madhabi Puri Buch, the Chairperson of the Securities and Exchange Board of India (SEBI), revealed an ambitious plan to introduce same-day settlement of trades on stock exchanges. Commonly known as the T plus zero (T+0) settlement, is groundbreaking move which is set to be implemented by the conclusion of the current financial year 2023-24.

Nearly after two decades, spurred by a strong banking system, SEBI prompts exchanges to embrace a T+0 settlement cycle next year. SEBI's initiative of T+0 settlement reflects a strategic effort to enhance efficiency and align with global market practices.

This move holds significant promise, aiming to reduce risk associated with the current T+1 settlement cycle and provide investors with a real-time settlement experience.

Term T+0 settlement

For those who are unfamiliar with the term, “T+0 settlement" denotes the settlement of trades on the same day as their execution. No more waiting for the next day for your trades to be finalized. It is just like receiving real-time feedback on your market operations, offering an immediate outcome of your trading results.

For example, you buy stocks in the morning, and by the afternoon, the trade is settled. This development is a game-changer for day traders and anyone who deals with the intensity of rapid market changes.

Current stock settlement

Currently, India operates on a T+1 settlement cycle for most trades on its stock exchanges. This means that after you buy or sell a stock, the transaction is finalized and the shares are delivered (for purchases) or payment is received (for sales) one business day after the trade date.

Going the Global way

Many international markets, have already incorporated T+0 settlements, and this puts India on the same map, attracting more players and bigger deals.

T+0 settlement will definitely attract international market. SEBI is catching up with other big markets and making India more attractive to investors. They are making it a competitive strategic move towards aligning with global standards. The T+0 move will make the markets more exciting, dynamic, and ready to win on the global stage.

No easy road

Previously, concerns were raised by certain foreign portfolio investors on the shortening of the settlement cycles citing forex-related worries. In July 2023, the chairperson announced that SEBI was aiming to introduce early settlement of trades on the stock exchanges by the next fiscal (2023-2024).

Before that, it's crucial to acknowledge that implementing the T+0 settlement comes with its set of challenges. The infrastructure needs to be strong enough to handle real-time settlements, and market participants, including brokers and clearing corporations.

Furthermore, this move could significantly burden foreign portfolio investors, as their involvement in the T+0 cycle might be hesitant due to operating from diverse geographies and time zones. Hourly settlements may exert substantial pressure on their custodians.

The implementation of the T+0 settlement, slated for the end of the fiscal year, underscores SEBI's commitment to staying at the top of financial innovation. As the capital markets regulator, SEBI’s this move is anticipated to lead a new era of expeditious and secure market transactions.

Investors and market participants can anticipate a change in the way trades are settled, with the immediacy of the T+0 settlement offering a dynamic and responsive dimension to stock market transactions.

Hopes ahead

SEBI stands guard over India’s financial market. It is diligently working with all stakeholders to ensure a seamless transition. The goal is not only to make T+0 settlement a reality but to make it a frictionless experience for everyone involved.

SEBI's proactive engagement with stakeholders and its strategic approach to implementation indicate a thorough preparation for this transformative shift. As the financial year progresses, market participants will be closely watching the developments, eagerly awaiting the realization of the T+0 settlement and the positive impacts it is poised to bring to the Indian stock market.

Rest assured, SEBI's move towards T+0 settlement is a bold leap into the future of stock trading in India. It reflects the regulator's commitment to innovation and efficiency, leading in a new era of swift and secure market transactions. This new change brings hope for a faster, more dynamic stock market experience.

‘The countdown to T+0 settlement has officially begun!’

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